BOSTON – As a special gubernatorial panel reviews a broad slate of operational issues at the MBTA, Pioneer Institute is releasing a report that outlines a roadmap for revamping the Authority governance, considering lessons learned from other emergency situations in Massachusetts including the Chelsea receivership and the control board model employed in Springfield.

The special panel, which will review reports internal and external to the T, can play a helpful role in synthesizing diagnostics and proposing changes to operations, communication and future planning and investment. It can also lay out long-term governance changes that can ensure better decision-making.

“Ask any T rider or Greater Boston employer and they will tell you that we need emergency action to fix the T,” says Jim Stergios, executive director of Pioneer Institute. “The lives of over a million people a day have been disrupted, resulting in the virtual closure of our city, and the loss of income and tax revenue. We must approach fixing the T with urgency that befits the seriousness of its impact on our residents and economy.”

The paper outlines why the control board model used in Springfield, not a Chelsea-style receivership, represents the best path for the T. Unlike receivership, the control board model does not break so-called Chapter 150E collective bargaining protections on wages and benefits. The control board is a more consultative body as it undertakes reform. Both these characteristics make it more palatable to legislators, and reforms undertaken in a more consultative fashion stand a greater chance of lasting beyond the board’s temporary mandate.

Massachusetts’ Experience with Hard and Soft Receiverships outlines the need for emergency legislation:

Establishing an emergency, time-limited board composed of individuals with extensive knowledge of transit, finance, technology and customer service would signal the urgent need to bring the T to a state of good repair.

The emergency board should focus solely on maintenance and postpone expansion commitments. It should have enhanced powers to: (1) swiftly rationalize fares and fees (up or down) based on business considerations; restructure the bus service and operate with broad control over work rules; (2) re-open procurements and shift greater risk to vendors; (3) suspend prohibitions on competitive bidding; and (4) bring transparency to the T’s retirement fund and shift its asset management to the state pension system.

Allow the emergency control board to remain in place until the T meets benchmarks for on-time arrivals and other performance metrics.

Finally, the paper closes with lessons learned from the Chelsea and Springfield receiverships that are applicable to the current MBTA emergency. These include the aforementioned enhanced powers, which would need to come through legislation; the need for technical input from the state’s budget, comptroller and revenue offices, as well as the state treasurer; and regular public updates on progress toward key performance metrics, among other recommendations.

“Today’s T stands in stark contrast to Massachusetts’ technologically savvy, knowledge-based economy,” said Stergios. “We need a T that runs on time and does not turn the lights out on businesses and jobs. This must get done now; kicking the can further down the road is not an option.”

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Pioneer Institute is an independent, non-partisan, privately funded research organization that seeks to improve the quality of life in Massachusetts through civic discourse and intellectually rigorous, data-driven public policy solutions based on free market principles, individual liberty and responsibility, and the ideal of effective, limited and accountable government.

Canceled commuter trains are becoming the norm leading to continued paralysis of our city. It is truly a hard thing to imagine—people standing on platforms for hours, often without information. And this in sometimes frigid temperatures.

How did we get here?

Between 2003 and 2013, the MBTA was the only one of 18 commuter rail transit systems in the U.S. to suffer a net decline in annual passenger trips, a drop of 5,341,272 trips per year, representing a 13% loss in annual ridership, according to data reviewed by Pioneer Institute from the National Transit Database. The following graph compares the MBTA commuter rail loss of annual passenger trips to the commuter rail transit systems with the biggest gains in trips over the same period.

Earlier this month, Pioneer Institute reported on the MBTA’s chronic problems with commuter rail on-time performance. But a review of federal transit data shows that reliability is only one of the serious problems that beleaguer the agency.

Over the past decade, the MBTA was compelled to offset high operating costs by raising fares. The resultant increases were greater than those of any other large scale commuter rail transit agency, with the T’s average fare per commuter rail trip increasing by 130% between 2003 and 2013 compared to the 59% national average increase of the nation’s big commuter rail systems. The effect of these fare increases, coupled with parking rate increases at MBTA lots and less than satisfactory on-time performance, has taken a toll on ridership.

The MBTA’s operating costs for commuter rail increased from $198,332,466 in 2003 to $351,358,190 in 2013. Over this eleven year period, total operating costs -related mostly to the contractual cost of the commuter rail operator- totaled $2,871,008,366. Fare revenue totaled $1,349,042,094 between 2003 and 2013, leaving a shortfall of $1,521,966,272 over the period resulting in a taxpayer subsidy of $5.18 per passenger trip in 2013.

YR

Operating Expense

Fare Revenue

SHORTFALL

Passenger Trips

Taxpayer subsidy per Passenger Trip

2003

$198,332,466

$84,853,863

$113,478,603

40,570,102

$2.80

2004

$217,279,023

$89,083,486

$128,195,537

39,965,738

$3.21

2005

$219,670,069

$98,790,037

$120,880,032

37,890,179

$3.19

2006

$223,835,440

$104,286,465

$119,548,975

37,797,601

$3.16

2007

$227,513,879

$123,020,901

$104,492,978

38,815,838

$2.69

2008

$251,917,625

$135,900,591

$116,017,034

39,207,383

$2.96

2009

$277,168,433

$137,526,369

$139,642,064

40,582,915

$3.44

2010

$280,287,152

$133,495,748

$146,791,404

36,909,924

$3.98

2011

$301,557,532

$135,327,041

$166,230,491

36,212,904

$4.59

2012

$322,088,557

$137,796,392

$184,292,165

36,083,946

$5.11

2013

$351,358,190

$168,961,201

$182,396,989

35,228,830

$5.18

TOTAL

$2,871,008,366

$1,349,042,094

$1,521,966,272

419,265,360

I think that a more meaningful way to conceptualize the MBTA’s commuter rail budget is to consider not only operating expenses but also capital expenditures. During the period from 2003 to 2013, the MBTA made capital expenditures of $1,415,266,988 to purchase rolling stock, build and upgrade stations, and expand the commuter rail system. While these expenses are funded in large part through bonded indebtedness, they nevertheless represent actual expenditures that are recurring as the system replaces locomotives, passenger cars, and makes innumerable capital upgrades included system expansion. For example, The MBTA’s 5-year capital plan for FY2015-19calls for capital expenditures of $6.198 billion.

See page 71 of the budget and notice how much is included for “snow fighting equipment”: $2.83 million, which is one-twentieth of one percent of the total. I personally recommend that this item be revisited, as well as all system expansion items included therein, until the MBTA addresses its painfully obvious maintenance problems system-wide.

When capital spending is included in the analysis, the taxpayer subsidy for each commuter rail trip is $10.50 per one-way passenger ride, on average.

YR

Operating Expense

Capital Expenditures

Operating Exp and Capital Expenditures

Fare Revenue

Shortfall

Taxpayer subsidy per Passenger Trip (incl capital expenditures)

2003

$198,332,466

$85,973,041

$284,305,507

$84,853,863

$199,451,644

$4.92

2004

$217,279,023

$125,662,419

$342,941,442

$89,083,486

$253,857,956

$6.35

2005

$219,670,069

$105,169,414

$324,839,483

$98,790,037

$226,049,446

$5.97

2006

$223,835,440

$153,716,796

$377,552,236

$104,286,465

$273,265,771

$7.23

2007

$227,513,879

$125,649,164

$353,163,043

$123,020,901

$230,142,142

$5.93

2008

$251,917,625

$83,440,692

$335,358,317

$135,900,591

$199,457,726

$5.09

2009

$277,168,433

$126,419,788

$403,588,221

$137,526,369

$266,061,852

$6.56

2010

$280,287,152

$126,593,772

$406,880,924

$133,495,748

$273,385,176

$7.41

2011

$301,557,532

$146,239,339

$447,796,871

$135,327,041

$312,469,830

$8.63

2012

$322,088,557

$149,024,505

$471,113,062

$137,796,392

$333,316,670

$9.24

2013

$351,358,190

$187,378,068

$538,736,258

$168,961,201

$369,775,057

$10.50

TOTAL

$2,871,008,366

$1,415,266,998

$4,286,275,364

$1,349,042,094

$2,937,233,270

Many supporters have argued that the MBTA is cash-starved, due in large part to the financial after-effects of the Big Dig. They argue that what is needed now is more money.

A careful look at the two preceding tables makes it obvious that that the MBTA commuter rail system has not been starved for taxpayer support. It received more than $2.9 billion in taxpayer funds between 2003 and 2013 to subsidize the commuter rail system alone. When all public subsidies are counted, the average one-way commuter rail trip is financed by a $10.50 contribution from the taxpayers. Public financial subsidization of other MBTA modes -including hard rail, light rail, buses, trolleys, ferries, and The RIDE- make it clear that the MBTA receives inordinate amounts of public funding. The MassDOT Board’s recent decision to purchase the CSX rail line for the purpose of initiating a full-service commuter rail line service from Hyde Park to Gillette Stadium — at a capital cost exceeding $80 million dollars — is an example of disregard for the T’s financial condition, reminiscent of the MBTA Director’s prior decision to build the Greenbush rail line, predicated on ridership projections that were later proven to be have been wildly unrealistic.

When the MBTA’s leaders feel confident that the subsidies will keep coming, they act accordingly. The MBTA’s lack of preparedness for the winter of 2015 has exposed the weaknesses of the MBTA’s management in planning for the future. More money will not lead to kinds of change to the T’s persistent managerial woes that got us into this situation. Now is the time to overhaul the T.

]]>http://pioneerinstitute.org/news/why-wasnt-the-t-funding-snow-storm-preparation/feed/1Working from facts on the crisis at the MBTAhttp://pioneerinstitute.org/better_government/working-from-facts-on-the-crisis-at-the-mbta/
http://pioneerinstitute.org/better_government/working-from-facts-on-the-crisis-at-the-mbta/#commentsFri, 13 Feb 2015 17:09:21 +0000http://pioneerinstitute.org/?p=17867

I had a chance to speak with Kirstie Pecci of MASSPIRG on WGBH’s Greater Boston about the challenges faced by the T. Good conversation, but a few clarifications would be helpful.

The T is important to the Greater Boston area, but really services as an essential cog in the role of the Hub across Massachusetts and the region. When it doesn’t work at acceptable levels, we lose days of work – hundreds of millions of dollars in economic activity potentially, as well as lots of state and local tax dollars. It affects livelihoods at all social strata. So this is a debate to have based on nothing but the facts.

In that spirit, let me offer two reactions to representations made by Kirstie. First and foremost, the MBTA’s debt is in no way related to the construction of Big Dig tunnels, ramps, bridges and roadways meant for motor vehicle use. The T owes over $5 billion in principal on its debt ($9 billion if you count interest), and a third of the $5 billion debt figure is the result of the rail projects associated with Big Dig mitigation. As Steve Poftak wrote in Boston Magazine in 2012:

The MBTA’s debt comes from three sources — $1.85 billion from spending since the 2000 start of forward funding, $1.65 billion that was transferred to the MBTA under forward funding and was related to previous transit projects, and $1.7 billion in funding for projects mandated under a Big Dig-related agreement. (N.B. All above figures are from the MBTA Advisory Board’s Budget and Fiscal Analyst Brian Kane’s invaluable Born Broke report. Kane, of course, shouldn’t be held responsible for the opinions in this blog.)

The so-called “Big Dig Mitigation” rail projects were 14 court-ordered transit-related construction projects, which advocates argued would provide environmental mitigation for the impact associated with the Big Dig’s new car load capacity. As Poftak notes, “The projects were agreed to in 1990 by the Sec’y of Transportation and the Conservation Law Foundation (see Exhibit A here) and have ‘evolved’ over time.” (Note again that CLF is a member of the Transportation for Massachusetts group.) And while the shorthand for these projects has become the “Big Dig Mitigation” projects, Poftak makes the point:

It’s also important to define what that $1.7 billion was spent on. The key point is that despite the moniker “Big Dig Debt,” all of these projects directly relate to transit expansion or improvements like extending the commuter rail on the South Shore and to Worcester, adding parking spaces, building out the Fairmount Line — not roadways and, certainly, not the Big Dig. They came about as a result of an agreement that had to be signed in order for the environmental permitting around the Big Dig to take place. Some suggest that another driver behind the signing (http://www.commonwealthmagazine.org/Voices/Considered-Opinion/2005/Spring/Dug-In.aspx) was to lock in a commitment to transit expansion and that the air quality justification for the agreement was flawed.

Secondly, Kirstie noted that apart from the recent service delays due to severe weather, the T is providing a high-quality service. As is the case with firms located in downtown Boston, most of Pioneer’s staff is dependent on the T. All too often, regardless of the season, they share their frustrations with bus, subway and commuter rail service. I personally think of good performance as:

a lack of breakdowns (translation: no need to detrain)

signalization that works predictably (not getting stopped underground for long periods of time)

on-time arrival (predictability)

communication on train status (in case you need to move an appointment back a bit)

adequate rider capacity (not having to watch two trains on the Green line pass you before you squeeze into THE third; when you’ve boarded the train or bus, not being thrust into exercises of forced public intimacy; goal line: some limited ability to read)

consistent access to WiFi (some limited ability to read, part 2)

climate control in the cars (to put in sophisticated language, less of “les odeurs”)

I’ll leave it to commuter and subway riders to tell me if they think the T is performing anywhere close to acceptably on these very basic performance metrics.

Follow me on twitter at @jimstergios, visit Pioneer’s website, or check out our education posts at the Rock The Schoolhouse blog.

The MBTA is broke and broken. It is structurally insolvent. Breakdowns and late arrivals are, indeed, unacceptable, but the bulk of the T’s troubles are not about Dr. Beverly Scott, who resigned yesterday as general manager. They are, in fact, the fault of multiple administrations and legislatures, as well as advocates who pushed the MBTA to expand faster than is reasonable – and without adequate funding to undertake, operate or maintain the projects. More immediately, they are the fault of the MBTA’s board, which is ultimately responsible to Massachusetts residents for the T. The board’s job is to uphold the public trust and ensure the good operation and management of the transit authority. They did not do that.

Over-expansion. The state has expanded the MBTA more than any other major transit system in the country over the last 25 years, even though it serves a relatively slow-growing metropolitan area. For example, the state committed the T to unreasonable projects like the Greenbush commuter rail line, which was built at a cost of $600 million with no federal participation and is attracting a negligible number of riders who are new to transit. Many are still pushing the T to build commuter rail service to the South Coast at a likely cost of $2.2 billion, even though inadequate ridership is projected. The MBTA itself has acted recklessly; most recently purchasing the rail rights between Boston and Foxborough at a time when the Authority lacks funding for basic infrastructure maintenance.

Irresponsible oversight & management. The MBTA has not taken maintenance of its current infrastructure seriously enough. The recent bidding process for a commuter rail operator was opaque, leading to an immediate winnowing from more than 20 potential bidders to just two. The contract length is not nearly long enough to generate investments in equipment. Regarding the subway system, newspaper reports note that the T has “failed to file reports detailing the troubled system’s needs for at least five years – and have yet to get a new database up and running to track maintenance costs.” The board’s complacency on this issue is unforgivable.

Headcount growth in hard times. According to the state’s own transparency website, OpenCheckbook.com, headcount at the T, even in difficult times, has increased by 900 since 2012. Since 2001, total compensation costs nearly doubled.

Reckless oversight of the MBTA pension system. The T has significant unfunded liabilities related to its retirement plan (MBTARF). The unfunded liability has increased from $111M in 2008, when the MBTARF was 94% funded, to $855M in 2012 (the last year for which data are available). That represents a 31 point decline, to only 63% funded.

In some ways, it is surprising that it took this storm to draw attention to the T’s failings, which are only partially related to funding. Fixing them and making the T a high-functioning transit system will require emergency action. Here is why:

It is well known that the T relies on a substantial state subsidy to sustain operations. Some of its current operational failures are due to the state imposing expansion projects-the so-called “Big Dig Mitigation” projects, which account for almost half of the MBTA’s $5 billion debt. That said, the T is currently funded at a substantially higher level than at the time of the 2000 “forward funding” promised reform. Today, the operating funds forward funding promised are finally being delivered.

Forward funding was premised on an assumption that sales tax revenues would rise approximately 3 percent per year. While the T was underfunded from 2001 to 2009, two significant changes have taken place since 2009. First, the state increased the MBTA funding by increasing the sales tax in 2009 and then raising the gas tax in 2013. As a result, the T’s revenue grew from just over $1.1 billion in 2001 to over $1.9 billion in 2014, an annual growth rate of 4.2 percent.

Pioneer Institute believes it is time for emergency legislation to fix the MBTA, and that the legislation should take two concrete steps:

First, place the MBTA in receivership, removing the power of the MBTA Board and establishing a receivership board. Such an action would follow the successful models employed in Chelsea and Springfield. Under the latter, the secretary of the Executive Office for Administration and Finance created a finance control board, which did not adversely impact collectively bargained rights. Both receiverships balanced municipal budgets and streamlined operations; in the case of Springfield, the city addressed a $41 million deficit in 18 months. Both cities earned higher bond ratings as a result.

At a minimum, give the receivership board the powers to:

Halt all expansion planning and construction except for the Green Line extension, which is too far along to stop. As Federal Transit Administrator Peter Rogoff noted while in Boston in 2010: “If you can’t operate the system you have, why does it make sense for us to partner in your expansion?”

Emphasize the purchase and placement into operation of new cars, signalization, switch heaters, and other maintenance and repair upgrades.

Restructure the bus service. In 2012 during public debates over how to close a $161 million budget gap, the T rolled out contingency plans that would have made cuts to less frequently used bus routes. While controversial, the scenarios demonstrated that many lines have very few riders. The T should have the flexibility to engage small-vehicle private operators to ensure that those who need service can get it without engaging a full bus at the full cost of an MBTA driver.

Re-open procurements, where appropriate, with an eye toward shifting risk to vendors.

Seek flexibility from federal and state legislative mandates on the T, such as Buy America provisions and the federal government’s overly prescriptive safety regulations, which extend production times, increase operating costs, and far surpass anything required in Europe.

Have the commonwealth assume portions of the debt load associated with the Big Dig mitigation projects in a way that builds MBTA accountability. Assuming a portion of the debt associated with the mitigation projects will create breathing room in the T’s operating budget by reducing the percentage of operating funds going to debt service. This action might help the Authority further improve its bond rating and save money on future borrowing (currently Aa2 rated by Moody’s). Pioneer believes that such a process should be undertaken gradually:

Engage an independent firm to conduct a full audit of all existing mission-critical transportation assets of the MBTA and rank assets based on their ability to improve on-time performance, reliability and public safety. Determine the cost to bring each of the assets identified to a state of good repair.

The state should immediately (2015) assume 25% of the debt load associated with Big Dig mitigation projects. The approximately $50 million in operating dollars this action would free up must be spent on the assets identified above based in the order ranked. Having a receiver in place is essential to making that happen.

If and when in 2016, 2017 and 2018, the T meets performance benchmarks set in legislation, allow for the state to assume additional debt load associated with the mitigation projects.

Put strict safeguards in place so this money does not get consumed by additional payroll or expansion project planning or implementation.